01. Introduction to Market Features in Financial Data
AI For Trading C5 L2 A01 Intro To Market Features V2
Market Features in Financial Data
Understanding Market Features
- Market features form the basis for developing trading models in reinforcement learning.
- They offer insights derived from raw financial data to capture market behaviour.
Types of Market Features
Price-Based Features:
- Open-High-Low-Close (OHLC): Core data points indicating price movements within a trading period.
- Returns: Percentage change in price, valuable across various time frames.
Volume-Based Features:
- Trade Volume: Reflects market activity and sentiment.
- VWAP (Volume Weighted Average Price): Indicates average trading price throughout the day, weighted by trade volume.
Technical Indicators:
- Moving Averages: Identifies trend directions and includes variations like simple and exponential averages.
- Relative Strength Index (RSI): Highlights overbought or oversold market conditions.
- MACD (Moving Average Convergence Divergence): Shows momentum through moving average relationships.
- Bollinger Bands: Visualize price volatility through deviations from a moving average.
Feature Engineering
- Enhances model performance by selecting and creating new features.
- Techniques include lag features and rolling statistics for trend analysis.
Leveraging these features aids in maximizing the predictive potential of trading models.
Supplementary Material - Technical Indicators
For a deeper look into some popular technical indicators, see the following Investopedia articles:
Top Technical Indicators for Rookie Traders
7 Technical Indicators to Build a Trading Toolkit
Think of these as a starting point to get you thinking about what types of indicators you might want to try. There are virtually endless indicators out there for technical analysis of financial markets. So, once you have an idea, it is recommended that you start by looking into popular indicators, such as those mentioned in the articles. If these popular indicators are not working for you, or if they do not quite capture the information you want them to portray, then it is recommended to do your own research, and move towards more obscure indicators which may better capture your intuition.
Investopedia is a reliable resource for such research, in addition to platforms dedicated to technical financial analysis, such as TradingView and Yahoo Finance, and webpages with .edu domains.